151117 Borrowing forecasts
  • Against expectations. There’s so much fun to be had on the Office for Budget Responsibility website. Among the attractions is this spreadsheet listing all of the major forecasts made in Budgets and Autumn Statements going back to 1970. I’ve used the public sector net borrowing ones to produce the chart above. It shows the difference, in percentage terms, between the borrowing originally forecast and the borrowing actually done by all the governments of the period.
  • The method. Imagine this bullet point in parentheses. It’s just a boring note about my methodology. For the original forecasts, I’ve used those first made by the government in question – so, for borrowing in 2010-11, it’s the forecast in the June 2010 Budget rather than in the December 2005 Pre-Budget Report. For the outturn figures, I went to this separate OBR spreadsheet, which accounts for various revisions and is more consistent for it. Close parentheses.
  • Why the earlier governments are better. One of the first things that stands out from the chart is the moderation of the earlier governments. The Heath administration expected to borrow £8.6 billion between 1970 and 1974, but it ended up borrowing £5.6 billion, or 34.9 per cent less – and similar stories can be told for the Wilson and Callaghan years, and for Thatcher’s first term. It ought to be said, however, that these governments are at an advantage in this setup. Back then, forecasts only looked a year or two into the future. There wasn’t as long for them to go awry.
  • It’s an economic thing. To some extent, the wild swings of the later years are a reflection of the economy. Major borrowed £205.5 billion, against an expected £22.0 billion, in the aftermath of the recession of the early 1990s. Brown got through £375.1 billion, instead of £92.0 billion, around the financial crisis. In these times, tax receipts fell, so politicians had to look to their creditors to finance the public sector.
  • With one exception. There is one particular exception to this: the Blair government of 2001 to 2005. These were years of relative plenty, and yet Tone and Gordon still ended up borrowing £102.9 billion rather than the forecast £10.0 billion, or 929.0 per cent more. And why weren’t they pilloried for it? Because no one really cared about the public finances then. After last Parliament, and as he prepares next week’s Autumn Statement, George Osborne will know that the same isn’t true now.